Sales and distribution management is one of the most important aspects of any business. Sales refer to business activities related to selling, i.e., the exchange of goods or services against money. It helps achieve profitability and is the only revenue-generating function in an organization.
Distribution refers to the process of making products or services available to end consumers for use, which is done through the firm’s distribution network formed by extra corporate organizations.
Thus, sales management tasks include analysis, planning, organizing, directing, and controlling of company’s sales efforts. Distribution management comprises the management of different distribution channels and physical distribution tasks.
Interdependence of Sales and Distribution
Sales and distribution management are interlinked with each other in various ways. Activities of the sales department have to be coordinated with channel operations to fulfill the company’s sales objectives. The sales department is the initiator and implementer of the dealer support operations like stock maintenance, local advertising, in-store displays, and promotion. Hence, the cooperation between the sales force and distribution outlets is crucial for the successful implementation of all the sales & marketing strategies.
Since sales and distribution departments are interdependent, one would define the scope of the other. For instance, an organization can choose whether to establish direct distribution, indirect distribution, or a combination of both channels. This decision is of strategic importance and will determine the sales effort required to be put in by the teams.
Following are the five decision areas that are critical in ensuring the effectiveness of sales strategy formulation.
Key Decision Areas in Sales and Distribution Management
1. Assessment Of The Competitive Situation And Corporate Mission
Corporate mission or goals directly affect the specific set of common sales objectives a company would like to achieve. The macro-environment forces such as political, economic, social, and technological variables have a significant bearing on a company’s ability to sell.
A sound market analysis is also essential to the goal setting for sales and distribution strategy. The company needs to know the current size and growth rate of the market for a particular product, geographical territory, purchasing trend, etc.
This will help the company decide what product to sell and whether to sell it directly to consumers or to sell through the retailer or the wholesaler. It also helps in deciding the price.
2. Setting Sales Objectives
Sales objectives direct the sales resources at hand to their most productive use. Sales objectives are of two types: qualitative and quantitative. Strengthening dealer relationships, good consumer support, and nullifying product misinformation are some examples of qualitative goals. The quantitative goals can be set in terms of sales volume in units or rupees, sales cost, accounts receivables, inventory levels, etc.
These goals affect both the size and quality of the sales force. For example, when a company selling home furnishing products relies only on its own sales personnel to carry out the entire sales function, the quality, and size of their sales force would be considerably different from that of a company where sales personnel are only required to coordinate with distribution channels.
3. Determining The Type And Size Of The Sales Force Required
The type of salesforce depends on the quality of contribution that top management expects from the company’s sales force and the actual workload that is to be generated. If the company is manufacturing sophisticated technical equipment, the company would expect its sales engineers to carry out activities from commissioning to the installation of equipment.
Apart from that, some other factors that influence the type and size of the sales force are marketing policy, distribution channel design, product/customer characteristics, market size, and allocation of sales tasks between channels and within the firm.
4. Territory Design
Another key decision area is to decide the organizational structure of the sales force. Companies often prefer to divide their market into sales territories based on geographical size or sales potential. This type of distribution provides intensive market coverage, leading to higher sales and better customer relations.
5. Establishing And Managing Distribution Channels
The channels of distribution are the only point of contact the end consumer has with the manufacturers. The distribution channels are responsible for consummating exchanges with the final buyers. In cases of indirect distribution, the sales organizations have to initiate dealer cooperation programs.
The company also has to ensure dealer support in the area where adequate stocks of products are maintained, along with local promotion and advertising. This decision area involves the choice of appropriate dealer incentive programs and procedures for sharing information in the distribution network to stimulate the selling efforts of distributive outlets.
Conclusion
Sales and distribution are two functions that have a higher degree of mutual dependence. The formulation of sales and distribution strategies requires a joint framework for decision making, which can be slightly confusing. Although, the modern, technology-driven consumer and distributor management systems make it easy to manage almost every sales and distribution activity, from controlling prices to automating the sales force.
